The first week of August brought a mix of signals for the U.S. economy. On the one hand, new factory orders dropped 4.8 percent compared to the previous month. That’s not just a small slip, it’s a significant slowdown in the pace of manufacturing demand, and it’s something economists will be watching closely for signs of whether this is a short-term blip or part of a broader cooling trend in industrial activity.
On the other hand, there was some genuinely good news on the trade front. The U.S. goods and services trade deficit narrowed to $60 billion. This is the smallest gap we’ve seen in a while, and it signals that exports have held up well compared to imports. A narrower trade deficit doesn’t automatically mean the economy is surging, trade balances can shift for a variety of reasons, but in this case, it’s a sign that some of the recent trade policies and global economic conditions may be helping close the gap.
Looking ahead, the market’s attention will turn sharply to inflation and consumer activity. July’s Consumer Price Index (CPI) data will be released, along with the import price index and retail sales figures. Together, these three data points will help tell the story of whether price pressures are easing, how much inflation may still be baked into imports, and whether American consumers are continuing to spend at the same pace we’ve seen over the past year. All three will feed directly into the Federal Reserve’s decision-making in the coming months.
Thought of the Week – Tariffs, Trade, and Shifting Currents
Back in April, President Trump announced a bold move: a 10 percent baseline tariff on almost every U.S. trading partner. It was one of the most sweeping trade policy changes in recent memory. The stated goals were straightforward but ambitious, boost U.S. manufacturing, raise government revenue, and reduce trade imbalances. Four months later, we’re starting to get a clearer picture of the impact, and as with most major policy shifts, the results are a blend of wins, losses, and unintended consequences.
From a revenue standpoint, the policy is doing exactly what it set out to do. The Treasury has collected record tariff income. In June alone, tariffs generated $27 billion in net revenue. Between April and June, the total hit $64 billion, which is roughly two-and-a-half times higher than the same period last year. That’s a massive inflow for the government in a very short time frame. From the trade balance perspective, the numbers also look positive at first glance. The goods trade deficit narrowed by nearly 10% to $265 billion. Much of that improvement came from reduced imports from China, which was a primary target of the tariff strategy.
But trade is never static, it’s fluid. And here’s where the unintended consequences emerge. While imports from China have dropped, deficits have deepened with Taiwan, Vietnam, and Thailand. These are countries whose supply chains are closely tied to Chinese manufacturing. What we’re seeing is a rerouting of goods through lower-tariff countries, not necessarily a fundamental shift in production. It’s like water flowing around a rock, block one path, and it finds another.
North American trade flows have also been impacted in uneven ways. Under the United States–Mexico–Canada Agreement (USMCA), Canada’s tariff rate has been raised to 35 percent, while Mexico has been given a 90-day reprieve, keeping its rate at 25 percent. As a result, the U.S. trade deficit with Mexico has widened, while the deficit with Canada has narrowed.
Inflationary pressures from these tariffs have been muted so far, thanks to businesses front-loading inventory, compressing profit margins, and using existing supply buffers. But this may not last. The new trade deals now feature a higher 15 percent baseline tariff in some cases, and as these work their way into the supply chain, the risk of higher consumer prices rises. If those prices begin to climb, the Federal Reserve could find its policy options more limited.
Check out the details on this from JPMorgan by clicking HERE.
Wisdom for the Week – Musonius Rufus and the Power of Habit
Musonius Rufus, a Stoic philosopher from the first century, had a very clear opinion on the question of theory versus practice when it came to living a virtuous life. If by theory we mean learning what’s right, and by habit we mean training yourself to act on what’s right, Musonius said habit is far more effective.
Why? Because in the real world, you’re not dealing with abstract ideas, you’re dealing with concrete situations that require action. A theory might look perfect on paper, but life rarely gives you perfect conditions. Shakespeare captured the same truth in Hamlet when he wrote, “There are more things in heaven and earth, Horatio, than are dreamt of in your philosophy.” In other words, you can’t think your way through every problem before you act. You have to develop the discipline to respond well to whatever comes your way, whether it matches your plan or not.
This is just as true in financial planning as it is in life. Knowing you should save for retirement is theory. Actually setting up the automatic transfers to your investment account every month is habit. One without the other is incomplete.
Weekly Tax Tip – The Adoption Tax Credit
This week, let’s turn the spotlight on one of the more generous and often overlooked tax benefits available to families: the adoption tax credit.
For 2025, the maximum credit is $17,280 per eligible child. This credit begins to phase out when your household income exceeds $259,190, with limits updated annually by the IRS. The credit applies in the year the adoption is finalized, even if you paid the expenses earlier. This is key, because timing can influence your planning. The adoption tax credit is non-refundable, meaning it can reduce your tax liability to zero but won’t produce a refund. That’s different from the rules that applied before 2012, when certain adoptions could qualify for a refundable credit. Special needs adoptions can qualify for even larger credits, and the IRS definition of “special needs” is broader than many people think. For example, children who have been abused may qualify, even if they don’t have a medical diagnosis.
Employers can also offer adoption benefits, and they too can receive a tax credit equal to what individuals can claim. Self-employed individuals can use a C-corporation to claim the credit, while owners of S-corporations claim it on their personal returns. There’s also a retirement account provision worth noting: since 2020, parents can withdraw up to $10,000 per parent from retirement accounts penalty-free to help pay adoption expenses.
One more advantage, unlike many other tax benefits, you are not required to keep receipts for adoption expenses in order to claim the credit. That said, it’s always smart to keep thorough records for your own protection.
College Planning – Strategies for Cutting Costs
College costs have been climbing for decades, and even high-income families feel the strain. The good news? There are proven strategies that can make higher education more affordable, no matter your income level.
The first step is to avoid assumptions. Many parents assume they earn too much to qualify for any kind of aid, but eligibility for need-based aid depends on more than just income. Use the Expected Family Contribution (EFC) calculator on the College Board’s website to get an estimate of what financial aid formulas will say you can afford. Consider this: a family with an adjusted gross income of $225,000 and one child in college might not qualify for need-based aid at most schools. But if that same family has two children in college at the same time, their chances for aid improve significantly, especially at private institutions.
Once you know your EFC, the next tool in your kit should be the net price calculator for each school your child is considering. This calculator estimates what you’ll actually pay after grants and scholarships are factored in. Be cautious, though, about half of these calculators are bare-bones versions that don’t ask for enough financial detail to produce accurate results. Always look for schools that use the more comprehensive version.
Asset ownership also matters in aid calculations. Parent assets are assessed at a rate of about 5 percent, while child assets can be assessed at 20 to 25 percent. This means that a custodial account in a child’s name can significantly reduce eligibility for aid. One solution is to move custodial assets into a custodial 529 plan, which is treated as a parent asset for aid purposes. If your family is unlikely to qualify for need-based aid, focus on schools that offer strong merit scholarships. These awards are often based on academic achievement, extracurricular involvement, or special talents, and they can dramatically reduce costs.
Finally, graduation rates matter. At state universities, only about a third of students graduate in four years, compared to more than half at private colleges. Every extra year in school adds another full year of tuition, fees, and living expenses, so choosing a school with a strong record of on-time graduation is one of the best cost-control measures available.
For more details check out this article by clickingHERE.
Bottom Line
This week’s developments, from falling factory orders to narrowing trade deficits, from the philosophical wisdom of Musonius Rufus to the financial impact of adoption credits and college planning strategies, all point to the same conclusion: success comes from informed, consistent action.
Markets change. Policies shift. Life throws curveballs. The people who get ahead aren’t the ones who wait for perfect conditions, they’re the ones who keep learning, keep adapting, and keep moving forward.
At Mission Financial Planners, our goal is to help you do exactly that. Whether it’s navigating trade policy’s impact on your investments, taking advantage of a valuable tax credit, or building a plan to pay for college without derailing your retirement, we help you turn information into action.